Final, Proposed Rules Point Way to Reimbursement for Providers in 2012

The Congressional “super committee” on deficit reduction meeting this fall may or may not recommend cuts in Medicare spending as part of its final report. And if the super committee fails to come up with a legislative agreement, payments to Medicare providers may be cut as part of an automatic deficit reduction fallback plan. But no one knows for sure at this point what the impact on Medicare providers will be.

Providers do have a better sense of what their Medicare reimbursement will be next year based on the annual round of Final rules that have been issued regarding various payment systems. Below is a summary of the Final rules that have been issued so far, as well as a look ahead to late fall when the last Medicare reimbursement related Final rules are published.

Inpatient hospital services. Payments for inpatient hospital services at 3,400 acute care hospitals will increase about 1 percent, after all adjustments to the standardized amount are factored in. There were no changes to the list of hospital-acquired conditions that hospitals must monitor and only minor changes to the Medicare Severity-Diagnosis-Related Group classification system that is used to classify each patient’s case for Medicare reimbursement.

Hospitals in counties that rank in the lowest quartile nationally for Medicare spending per enrollee or that have a low volume of patients are eligible for additional payments. Starting with the 2012 fiscal year in October of this year, hospitals that have excess readmissions for certain selected conditions will see their payments reduced.

Long-term care hospital services. The long-term care hospital (LTCH) standard federal rate for FY 2012 will be $40,222.05, an increase from the $39,599.65 amount for FY 2011. For 2012, a hospital must have an average length of stay of greater than 25 days to be considered a long-term care hospital. The moratorium on establishing and classifying new LTCHs and LTCH satellite facilities imposed by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) is extended for another two years. This applies to bed increases in LTCHs and LTCH satellite facilities that were exempted from the original moratorium because they were undergoing expansions.

New for FY 2012, the LTCH quality-reporting program will be in place. Between October 1, 2011, and December 31, 2012, LTCHs will be required to submit data on three quality measures that focus on patient safety: (1) urinary catheter-associated urinary tract infections, (2) central line associated blood stream infections, and (3) pressure ulcers that are new or have worsened. Should a facility fail to submit performance data, their payments will be reduced by two percentage points beginning in FY 2014.

Hospices. Hospice payments will increase by about $310 million overall in FY 2012. The hospice aggregate cap calculation methodology also will be changed to a patient-by-patient proportional methodology to reduce the burden on CMS, providers, and the courts from litigation. Under the patient-by-patient proportional methodology, for each hospice, CMS would include in its number of Medicare beneficiaries only that fraction which represents the portion of a patient’s total days of care in all hospices and all years that was spent in that hospice in that cap year, using the best data available at the time of the calculation. Beginning in the 2012 cap accounting year, the whole and fractional shares of Medicare beneficiaries’ time in a given cap year would then be summed to compute the total number of Medicare beneficiaries served by that hospice in that cap year.

Starting in 2012, any hospice physician will be allowed to perform the required face-to-face encounter with a patient regardless of whether that same physician recertifies the patient’s terminal illness and composes the recertification narrative. CMS declined, however, to add physician assistants and clinical nurse specialists to the list of healthcare professionals that would be allowed to conduct the face-to-face encounter because of statutory limitations. Similarly, allowing community physicians and nurse practitioners (NP) to conduct the face-to-face encounter and report their findings to a physician employed by the hospice would also require a statutory change.

Inpatient rehabilitation facility services. Payments to IRFs will be increased 2.2 percent for FY 2012, an estimated increase in total IRF PPS payments of $150 million. Although the Proposed rule anticipated updates being made to the IRF facility-level adjustments factors, including the rural, low-income patient (LIP), and teaching adjustments, using the most recent three years of data, CMS has instead decided to freeze the adjustments at the FY 2011 levels. The purpose of maintaining the 2011 levels is to give CMS an additional year to look into ways to improve the accuracy and consistency of the current methodology used to calculate the factors.

The Final rule implements the new quality reporting program mandated by PPACA. Beginning October 1, 2012, IRFs are required to submit data on initially two quality measures: (1) urinary catheter-associated urinary tract infections, and (2) pressure ulcers that are new or have worsened. Should a facility fail to submit performance data, their payments will be reduced by two percentage points beginning in FY 2014.

IRF PPS regulations will now apply to both freestanding IRFs and IRF units within acute care hospitals and critical access hospitals, as they are paid the same and are typically subject to the same requirements. Freestanding IRFs and rehabilitation units will now be able to expand in the middle of a cost reporting period; previously, regulations limited expansion to the start of a cost reporting period. Facilities are no longer required to get approval for an increase in hospital bed capacity that is greater than 50 percent of the number of beds it seeks to add to a unit.

Skilled nursing facility services. Payments to SNFs in FY 2012 will drop by $3.87 billion, an 11 percent decrease in payments compared to FY 2011. The decrease is related to the recalibration of case-mix indexes (CMIs) based on the claims and assessment data from the first eight months of 2011, meant to accurately reflect parity in expenditures between the current Resource Group Utilization (RUG) IV, which became effective on October 1, 2010, and the previous case-mix classification known as RUG-III.

CMS also revised the definition of group therapy and the allocation of a therapist’s time for group therapy. CMS noted that an increase in group therapy services created a concern that group therapy was being used in place of individual therapy because of a possible payment incentive. As such, and to better reflect utilization and cost, the new definition states that group therapy is “therapy provided simultaneously to four patients who are performing similar therapy activities.”

Proposed rules

Physician services. Any changes to physician reimbursement in 2012 included in the Proposed rule issued in July are dwarfed by the impending 29.5 percent reduction in physician payments required by law. For the past several years, physicians annual reductions in their Medicare payments, as required by law, only to have Congress step in at the last minute to limit the reductions or even increase payments. Still, until the underlying law is changed, physicians face steep and growing reduction in Medicare payments every year.

End-stage renal disease facility services.Updates to the CY 2012 Medicare ESRD policies and payment rates and incentives for improved quality of care and better outcomes for beneficiaries diagnosed with end-stage renal disease through new requirements for the ESRD Quality Incentive Program (QIP) would affect centers paid under the ESRD PPS. Under the Proposed rule, the composite rate portion of the ESRD PPS blended payment would be $141.52. The $141.52 would reflect the addition of the CY 2011 Part D per treatment amount ($0.49) to the CY 2011 composite rate of $138.53, and application of the ESRD market basket minus a productivity adjustment.

Application of a 1.8 percent increase to the CY 2011 ESRD PPS base rate of $229.63, would result in a CY 2012 ESRD PPS base rate of $233.76. A proposed CY 2012 ESRD PPS wage index budget-neutrality adjusted base rate of $234.02 would be based on the ESRD PPS base rate and wage index budget-neutrality adjustment factor of 1.001126.

Outpatient hospital services. Under the Proposed rule issued in July, payments for hospital outpatient services will increase by 1.5 percent for services provided under OPPS during calendar year (CY) 2012. These increases will result in an estimated $41.9 billion being paid under OPPS to 4,000 hospitals during 2012.

CMS is proposing to refer questions about supervision of specific services provided under OPPS to the Ambulatory Payment Classification (APC) Panel, a panel initially created under the Federal Advisory Committee Act to provide technical advice and recommendations to CMS about assigning items and services furnished in hospital outpatient departments to appropriate APCs. CMS is also proposing to add two to four representatives of critical access hospitals (CAHs) to the panel solely for deliberations relating to supervision levels.

CMS is proposing to add 9 quality measures to the current list of 23 measures to be reported by hospital outpatient departments; a total of 32 measures would be reported for purposes of the CY 2014 payment determination.

Ambulatory surgical center services. Also according to a Proposed rule issued in July, payment for services provided at ambulatory surgical centers will increase 0.9 percent for service rendered in 2012. This increase will result in $3.61 billion being paid to 5,000 ASCs in calendar year (CY) 2012.

CMS also is proposing to implement a quality reporting program for ASCs by proposing eight quality measures for reporting beginning in CY 2012. The proposed measures include seven outcome and surgical infection control measures and one healthcare associated infection measure reported through the National Healthcare Safety Network. CMS also is proposing to add two structural measures for reporting in CY 2013 for the CY 2015 payment determination–one for safe surgery checklist use, and one for ASC facility volume data on selected ASC surgical procedures.

Home health services. According to the Proposed rule issued in July, home health agencies next yearwould be subject to an overall 3.35 percent decrease in Medicare payments, an estimated decrease of $640 million compared to 2011. The net decrease would include a $310 million increase related to the combined effects of market basket and wage index updates, offset by a $950 million decrease in payments to account for increases in aggregate case-mix that were related to billing practices and not related to changes in the health status of patients.